By Daniel Hunter
Belt-tightening by the British public in the face of a stubborn recession has significantly changed how they behave during the busiest shopping period of the year — the run up to Christmas.
It has long been the norm that shoppers on both sides of the Atlantic wait until the last weekend in November (the weekend after Thanksgiving Day in the US) before really hitting the shops. But with wages falling, prices rising and little sign of imminent economic recovery, UK consumers are settling into new ways of not only where they do their shopping and how much they spend on it, but when they do it, all in a bid to live within their means.
Britons have demonstrated remarkable self-control during the economic downturn, using the past four years to pay down their debt and reduce the number of cards they have in their wallets. The amount owed on credit cards is at its lowest level for a decade.
Analysis of UK spending patterns by Barclaycard, who handle half of all UK transactions, shows that this belt-tightening behaviour has led to consumers bringing forward their spending in a frantic bid to take advantage of ever-earlier promotions and keep down the cost of Christmas.
For the second year in a row now, spending has grown between late October and mid-November — this year by 3.9% — initially benefitting retailers, many of whom had brought forward their best offers to kick-start the shopping period. But then, in a break with the past, as offers dry up and shoppers hold onto their cash and wait for the next promotional period, the second half of the month saw it fall.
The trend contrasts that of the US, and to historic norms in the UK, where spending grew from late November right through to the last shopping weekend in December.
Online spending is seeing growth of around 10% this year and has already delivering two record-breaking days. Huge shifts in ‘e-spending’ on electronics (up 94%) and in department stores online (up 31%) are behind the growth. Total online spending now accounts for a fifth (21%) of total spending — for the first time.
By doing more of their shopping online in a bid to find the best deals, shoppers have reduced the amount they spend per transaction. So, whilst the number of purchases this year has gone up, net overall spending is down as a result of the average spend per purchase falling by 2.3% this year.
Fierce competition between retailers, greater insistence on finding the best deals, and a reduction in impulse purchasing has also helped shoppers keep their expenditure down. As has greater use of discounts and a shift in spend to lower priced retailers, restaurants, and modes of transportation.
After adjusting for inflation, spend growth in the UK has been down 1-2% in the last two Christmas seasons. In contrast the US saw positive inflation-adjusted growth in 2011 (up over 1%) as well as strong Black Friday and Cyber Monday sales so far in 2012.
“People have shown remarkable restraint during the tough economic climate and we’re now seeing this filter through to how they do their Christmas shopping," Valerie Soranno Keating, CEO of Barclaycard, said.
"The modern-day, tactical, savvy shopper is causing a real shift in spending patterns as they look to get more bang from their buck and refuse to take on more debt.
“It’s been the norm for many years that spending grows from early November right through to Christmas, but it’s obvious that shoppers are now much more responsive to the deals on offer — both on the high street and online - and are holding back their spending until they see the prices they want to pay.”
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